Downsizing—whether in reference to lifestyle or living accommodations—has become an expected part of retirement, but it’s not necessarily the best strategy, says The Wall Street Journal in an article listing a variety of factors senior living providers should consider when targeting boomers.
The number of boomers who delayed retirement during the recession and plan to downsize exceed those who’d prefer to “upsize” by nearly 3 to 1, according to Louise Keely, chief research officer at the Demand Institute.
However, many boomers are profiting less from the sale of their homes than they might have expected, says the WSJ article, and if they’re buying a new home or moving into a retirement community with monthly fees, they may not have much leftover cash.
There are other factors, too, that can detract from downsizing, including the difficulty of paring down possessions or adjusting to new, smaller quarters. With about 40% of Americans between the ages of 50 and 64 planning to move within the next five years, according to a Demand Institute study cited by The Wall Street Journal, it’s a challenge many boomers are going to face.
Older adults who moved in the 1990s and early 2000s because of a change in circumstances—think job loss or divorce—generally chose to downsize, according to a study from Boston College’s Center for Retirement Research, but it didn’t really result in a financial windfall, says WSJ. Rather, most of profit from the sale of their home went directly to their new home—freeing up just $26,000 on average.
For those who did move, a “large majority” end up within 20 miles of their previous homes, according to another Boston College study, often leaving them with similar costs of living.
Additionally, downsizers often have difficulty cutting back on pre-retirement lifestyles.
“Most people are really attached to their lifestyles,” says Esteban Calvo, co-author of the Boston College study that looked at home equity and now an associate professor at Diego Portales University in Santiago, Chile, in the article. “They tend to look for a home that will allow them to maintain the same routines.”
Written by Alyssa Gerace